Professional Documents
Culture Documents
13 Chapter 2
13 Chapter 2
13 Chapter 2
**http://www.chillibreeze.com/articles_various/fmcg-in-india.asp
45
inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11
HUL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal
care category.
Cigarettes account for 17% of the top 100 FMCG sales, and just below the
personal care category. ITC alone accounts for 60% volume market share
and 70% by value of all filter cigarettes in India.
The foods category in FMCG is gaining popularity with a swing of launches by
HUL, ITC, Godrej, and others. This category has 18 major brands,
aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders
segment. The food category has also seen innovations like softies in ice
creams, chapattis by HUL, ready to eat rice by HUL and pizzas by both
GCMMF and Godrej Pillsbury. This category seems to have faster
development than the stagnating personal care category. Amul, India's largest
foods company, has a good presence in the food category with its ice-creams,
curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100
FMCG brands, dominates the biscuits category and has launched a series of
products at various prices.
In the household care category (like mosquito repellents), Godrej and Reckitt
are two players. Goodknight from Godrej, is worth above Rs 217 crore,
followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HUL's
Clinic and Sunsilk make it to the top 100, although P&G's Head and
Shoulders and Pantene are also trying hard to be positioned on top. Clinic is
nearly double the size of Sunsilk.
Dabur is among the top five FMCG companies in India and is a herbal
specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 20052006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika,
Hajmola and Real. Asian Paints is enjoying a formidable presence in the
Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific,
Caribbean, Africa and Europe. Asian Paints is India's largest paint company,
with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global
46
magazine, USA, ranked Asian Paints among the 200 Best Small Companies
in the World.
Cadbury India is the market leader in the chocolate confectionery market with
a 70% market share and is ranked number two in the total food drinks market.
Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems.
The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in
consumer products and services in the Global Beauty and Wellness space.
The Indian fragrances market generated total revenues of $25.6 million in
2009, representing a compound annual growth rate (CAGR) of 9% for the
period spanning 2005-2009.
The soap and detergent industry covers laundry and toilet soaps and
synthetic detergents in the form of liquids, powders and bars. These are
consumer products and their quality, price, marketing and distribution
network determines the success of the units in the sector. The industry
has developed both in the small scale sector and organized sector. The
manufacture of detergents and toilet soaps has been deli censed
The overall Indian personal care market has the potential to grow at 1516% per annum and thereby double to US$ 8 billion (approx 40,000 crore)
by 2012.
exploiting the potential to the full extent. There are 400,000 plant species
of both aromatic and medicinal plants known to the scientists. Of these
about 2000 species come from nearly 60 botanical families of essential
oils. Total production of essential oils in the world is over 100,000 tones.
Indias share is estimated to be about 15%. This is almost stagnant for
quite some time due to a variety of reasons.
More than 300 essential oils are in use today. Essential oils contain on
average 100 chemical components and have myriad functions. Some are
antibacterial, antiseptic or digestive while others are antidepressant.
The major drivers for Essential oils and perfumes are Other Mint oils,
Peppermint Oil ( Mentha Piperita), Perfumes and Perfumery Compounds,
Other perfumes and Toilet Waters and Synthetic Perfumery compounds.
THE TOP 10 COMPANIES IN FMCG SECTOR
S. NO.
Companies
1.
2.
3.
Nestl India
4.
GCMMF (AMUL)
5.
Dabur India
6.
7.
Cadbury India
8.
Britannia Industries
9.
10.
Marico Industries
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The personal care category has the largest number of brands, i.e., 21,
inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11
HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal
care category. Cigarettes account for 17% of the top 100 FMCG sales, and
just below the personal care category. ITC alone accounts for 60% volume
market share and 70% by value of all filter cigarettes in India.
The foods category in FMCG is gaining popularity with a swing of launches by
HLL, ITC, Godrej, and others. This category has 18 major brands,
aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders
segment. The food category has also seen innovations like softies in ice
creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both
GCMMF and Godrej Pillsbury. This category seems to have faster
development than the stagnating personal care category. Amul, India's largest
foods company, has a good presence in the food category with its ice-creams,
curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100
FMCG brands, dominates the biscuits category and has launched a series of
products at various prices.
In the household care category (like mosquito repellents), Godrej and Reckitt
are two players. Goodknight from Godrej, is worth above Rs 217 crore,
followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HLL's
Clinic and Sunsilk make it to the top 100, although P&G's Head and
Shoulders and Pantene are also trying hard to be positioned on top. Clinic is
nearly double the size of Sunsilk.
Dabur is among the top five FMCG companies in India and is a herbal
specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 20052006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika,
Hajmola and Real. Asian Paints is enjoying a formidable presence in the
Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific,
Caribbean, Africa and Europe. Asian Paints is India's largest paint company,
with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global
49
magazine, USA, ranked Asian Paints among the 200 Best Small Companies
in the World
Cadbury India is the market leader in the chocolate confectionery market with
a 70% market share and is ranked number two in the total food drinks market.
Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems.
The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in
consumer products and services in the Global Beauty and Wellness space.
Indias GDP unlike that of other emerging developing countries has a bigger
consumer percentage than investment. This is because Indias economic
growth model has not followed the traditional export growth model of the other
countries in Asia like China.T his makes India more resilient to external
shocks like the Lehman crisis and provides a more domestic orientation to
growth. India has one of the fastest growing economics in the world and as
the per capita income increase, consumer companies in India are reaping
outsized rewards. India has a competitive consumer goods market with a
number of domestic and international companies competing in multiple
markets and segments. Some of the companies like HLL which is a subsidiary
of the global consumer giant Unilever has become an Indian company all but
in ownership. Fast Moving Consumer Goods (FMCG) companies are different
from Consumer Durables companies. FMGC companies are what is known as
Consumer Non-Discretionary Group of Companies. These Companies sell
products of everyday use and are recession proof in the sense that the
products sold by FMCG Manufacturers cant be ignored even in times of
economic recessions.
Fast Moving Consumer Goods Companies have been expanding rapidly in
the Indian market and and are set to grow to the next level as Indias middle
class grows bigger and bigger and the existing middle class becomes richer.
Indias Fast Moving Consumer Goods Stocks form a great defensive
investment class.T hey not only have defensive characteristics but also
growth as well. Indias FMCG sector is expected to grow by more than 100%
in the next 5-6 years as more and more consumers move from unorganized
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part of the industry to the organized industry. Though competition has been
fierce in Indias Non Discretionary Consumer Goods Industry with the P&G
and Unilever Price War in the Detergent Segment, the Industry has seen its
share of winners with Nestle, Colgate being multiages in the last 10 years
giving huge returns to investors. These stocks trade at high multiples justified
with their very high returns, strong brands and low investment requirements.
ITC Ltd. With a market capitalization of Rs.137, 000 crores, ITC is one of
Indias foremost private sector companies.
products. It specializes in infant food, while the other products in this range
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are ghee, dahi & dairy whitener. It also has a diversified product chain like
prepared dishes & cooking aids the major one being Maggi, others are
sauces, pasta, beverages like coffee & iced and instant tea. Nestle is also
known for its chocolate & confectionery range the major brands being Kitkat,
polo & bar-one. The sale is not only limited to India but also abroad. The
company marked a steady growth in 2010 with Rs. 1,000 crores as revenues
& a net profit margin of 15%. It has been acknowledged amongst Indias Most
Respected Companies and amongst the Top Wealth Creators of India.
United Spirits Ltd. - The Company was earlier known as the McDowell & Co.
The market cap of the company is Rs 13,000 crores with revenues of
Rs.1,000 crores & 6% net profit margin in Dec 2010. United Spirits Limited
(USL) is the largest spirits company in India and second largest spirit
company in the world. It enjoys a strong 59% market share for its first line
brands in India. The company has 20 millionaire brands (selling more than a
million cases per annum) with Whyte & Mackay and Bouvet Ladubay being its
100% subsidiaries. The leading brands are Antiquity, Black Dog, Royal
Challenge, Signature, Bagpiper, McDowells No.1. The company is known for
creating new benchmarks in blends and packaging in the global spirits
industry.
Dabur India Dabur India Limited is the fourth largest FMCG Company in
India with Market Capitalization of Rs.16,000 crores. Dabur operates in key
consumer products categories like Hair Care, Oral Care, Health Care, Skin
Care, Home Care & Foods. For the past 125 years, the company has been
dedicated to providing nature-based solutions for a healthy and holistic
lifestyle. They touch the lives of consumers, in all age groups, across all social
boundaries. Dabur specializes in Ayurvedic products. Some well known in the
category are Chyawanprash, baby medicines Janam-Ghutti & gripe water,
Hajmola, Glucose-D & Pudinhara. It earned a revenue of Rs.900 crores & a
net profit margin of 14% in Dec10.
Colgate Palmolive (India) Ltd. With Rs.11,000 crores as the market
capitalisation & Rs.500 crores revenues with a net profit margin of 11% in
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levels remain low India's per capita consumption of soap at 460 gms per
annum is lower than that of Brazil at 1,100 gms per annum.
Distribution network
Soaps are available in 5 m retail outlets in India, 3.75 m of which are in the
rural areas. Therefore availability of these products is not a problem. 75% of
India's population is in the rural areas; hence about 50% of the soaps are sold
in the rural markets.
54
Growth
Rural demand growth is expected to occur mainly with consumers moving up
towards premium products. But in the past, the proportion of premium soaps
to economy soaps has not changed much, in volume terms. This is because
as some consumers move up the value chain with increase in disposable
incomes, some consumers move down looking for cheaper substitutes as
prices move up. This has been the case especially, as growth in soap prices
has generally outpaced overall consumer inflation.21
Detergents
The Indian fabric wash market consists of synthetic detergents (comprising
bars, powder and liquids) and oil-based laundry soaps.
Although the per capita consumption of detergents in India (2.7 kg pa) is
comparable to some countries like Indonesia, China and Thailand (around 2
kg pa), it is lower than in others such as Malaysia, Philippines (3.7 kg) and the
USA (10 kg). The Indian detergent market is expected to grow at 7-9% pa in
volume terms. The synthetic detergent market can be classified into premium
(Surf, Ariel), mid-price (Rin, Wheel) and popular segments (Nirma), which
account for 15%, 40% and 45% of the total market, respectively. The product
category is fairly mature and is dominated by two players, HUL and Nirma.
Nirma created a revolution in the market by pioneering the concept of low-cost
detergents.
Growth
High consumer awareness and penetration levels will enable the market to
grow at an average 8-10% per annum with slightly higher growth in the rural
areas. Higher penetration stems from popularity of low-cost detergents.
Hence, besides increase in per capita consumption, there is tremendous
scope for movement up the value chain.
21
**(http://www.equitymaster.com/research-it/sector-info/consprds/consprds-products.html)
55
HUL, Nirma and P&G are the major players in the market with 40%, 30% and
12% share, respectively. While HUL dominates the premium segment, Nirma
is the leader in the popular segment.
Personal Care Products
The annual value of personal products business in India, including oral care,
hair cares and skin cares products, is currently estimated to be Rs 54.6 bn.
Just five years ago personal products were considered to be luxury items and
attracted a high excise duty of 120% (except the oral care category). Gradual
taxation reforms in India since 1991 have lowered the excise duty rates to a
reasonable 30%, making these products more affordable. At the same time,
rising income levels have led to rising aspirations on the part on Indian
consumers. These factors have been the catalysts in the exponential growth
rate in the personal product category over the past five years.
Personal care products are further divided into 6 categories: Oral care
Skin care
Cosmetics
Feminine Hygiene
Oral Care
The oral care market can be segregated into toothpaste (60%), toothpowder
(23%) and toothbrushes (17%). While 60% of toothpaste is sold on the family
platform, around 35% is sold on cosmetic propositions. On the other hand,
while toothpowder accounts for 52% of the market, red toothpowder accounts
for 40% and black toothpowder accounts 8%. The penetration level of
toothpast/powder in urban areas is 3X that in the rural areas. Traditional
materials such as neem and tobacco are popular for cleaning in the rural
56
areas, Frequency of usage for toothpaste is only 1.5 times among other
consumers, compared with 2 times in the developed world. Per capita
consumption of toothpaste is only 70 gm compared with 300 gm in Europe
and 150 gm in Thailand.
Given the low per capita consumption and penetration rates, toothpaste
demand is mainly being driven by the overall market growth of 8-10%.
Toothpowder growth is also being driven by the rural segment.
Hair care - Oils
The hair oil market is huge, valued at Rs 6 bn. Due to the varied consumption
habits of consumers across the country, where coconut oil and edible oil are
interchangeably used, the size of the market is likely to be higher than
estimated. More importantly, the market is growing at an impressive 6-7% in
volume terms despite the high penetration level.
Usage of hair oil is a typical Indian traditional habit. It is perceived to offer
benefits of nourishment, hair strengthening, faster and better growth, and
reduce the problem of falling hair. There are two types hair oil available in the
market; coconut oil and non greasy perfumed oil. Coconut oil comprises 2/3 rd
of the total market and the balance comprises the non greasy perfumed oil.
Usage of hair oil is an everyday habit with 50% of the population out of which
some perceive that massaging the head with hair oil has a cooling impact.
The penetration of hair oil is fairly high at around 87% and evenly distributed
among the urban and rural areas.
Hair Care - Shampoos
The shampoo market in India is valued at Rs 4.5 bn with the penetration level
at 13% only. The market is expected to increase due to lower duties and
aggressive marketing by players Shampoo is also available in a sachet, which
is affordable and makes upto 40% of the total shampoo sale.
57
58
areas. Pond's dominates the talcum market with a 70% share followed by
Johnson & Johnson, which has a 15% market share.
Attar and alcoholic perfumes each account for 50% of the fragrance market
estimated at Rs 3 bn. In the alcoholic perfume market, 1/3rd represented by
an unorganised, with the balance largely imported. The June 98 budget
halved duties to 50%. Lakme has a minor presence in the segment.
Perception of damage to skin on account of chemical ingredients restricts
usage of face care products. The nailpolish market is the largest at Rs 1.25bn
followed by the lipstick market at Rs 0.7 bn. All segments in this category are
growing at Rs 25-30%.
Deodorants have a very negligible presence in the Indian market with an
estimated of Rs 0.3 bn. Worldwide, deodorants is the largest market followed
by skin care, shampoos and toothpaste. HUL has launched a couple of
products in this segment.
Feminine Hygiene Most women use cloth during their menstruation days. This
is because price is the biggest entry barrier. A pack of 10 sanitary napkins
would cost Rs 30-40. Therefore, average spending during the menstruation
days would be around Rs 48, which is expensive by Indian standards.
While awareness in the urban areas would be reasonable given the
substantial advertising, the penetration rate is abysmally low at 10%. The
product is virtually absent in rural markets.
Given the low base and increasing awareness of hygienic products, the
market is growing at a robust 20-25%. Entry of cheaper brands, at Rs 20 for a
pack of 10, has spurred market growth. Currently, the market is mainly urban.
Indian cosmetics market
This market has been growing at a rapid pace and outpaced all market
dimensions. The cosmetics market is not just expanding, but also becoming
more complex due to the influence of Western Culture on the population.
Media has played a quite significant role in the growth of the industry.
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Increasing consumer awareness and affordability are the two key growth
drivers of the Indian cosmetic industry. Our research revealed that segments,
especially hair care have been showing tremendous performance and
emerged as a potential investment area for players. Moving forward, hair care
market is anticipated to grow at a 20% CAGR during 2011-2014 to reach
around INR 208 Billion by 2014. Indian cosmetics industry has witnessed
strong growth during the past few years and has emerged as one of the
industries holding immense future growth potential. The cosmetics industry
registered impressive sales worth Rs 422.3 Billion (US$ 9.3 Billion) in 2010.
The sector has mainly been driven by improving purchasing power and rising
fashion consciousness of the Indian population. Moreover, the industry
players are readily spending on the promotional activities to increase
consumer awareness.
Perfumes have been a part and parcel of our lives since time immemorial.
Attars which are the oldest form of fragrance are used till today. In ancient
India scented oils made from flowers and herbs were used as perfumes. The
concept of branded perfumes in India is relatively new.
Branded perfumes in India today have become an inseparable part of an
individual. Adorning and dressing up is a like ritual for a woman. Along with
looking good one has to also smell good these days. The usage of perfumes
is becoming an indispensable part of every Indian. Nowadays people are
recognized with the kind of aroma they exhibit. Nowadays perfumes define
the style statement of the Indian woman and man both.
The global perfume market is estimated at $ 40 billion, out of which India and
China have a considerable share. The Top Perfume Brands in India are
Christian Dior, Hugo Boss, Calvin Klein etc. These top perfume brands in
India are known for their vast collections of unique and elegant perfumes. Be
it in the form of colognes, body sprays, apparel scents or deodorants
perfumes in Indian are used by all classes and masses. The perfume industry
in India has witnessed stunning growth over the last two decades. The Indian
perfume industry which was simply a cottage industry a few decades ago
turned into a full fledged fragrance industry lately. Presently the perfume
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market in India is almost worth Rs 300 crores and is growing at a rapid rate of
almost 100% annually. According to industry experts the market trend shows
a promising growth of almost double the figure in the next two years. The
credit for the growth in the branded perfume market in India is also largely due
to the fact of the marketing strategies adapted by the top perfume brands in
India. Mostly endorsed by celebrities these perfume brands create such an
aura that people do not think twice before paying a hefty sum for a tiny little
bottle.
Top Perfume Brands in India
1. Clive Christian Imperial Majesty
2. 10 Corso Como
3. Turmeric and Roses
4. Naphthalene and Indole
5. Fish Auction in Kochi
The size of Indian Cosmetics Industry globally is $ 274 billion, while that of the
Indian cosmetic industry is $ 4.6 billion. According to analysis and figures
given by the Confederation of Indian Industries (CII), the total Indian beauty
and cosmetic market size currently stands at US$950 million and showing
growth between 15-20% per annum.22
Since 1991 with the liberalization along with the crowning of many Indian
women at international beauty pageants, the cosmetic industry has come into
the limelight in a bigger way. Subsequently there has been a change in the
cosmetic consumption and this trend is fueling growth in the cosmetic sector.
Indian cosmetic Industry had rapid growth in the last couple of years, growing
at a CAGR of around 7.5% between 2006 and 2008. While this is due to the
improving purchasing power and increasing fashion consciousness, the
industry is expected to maintain the growth momentum during the period
2009-2012. In the Indian Cosmetic Industry both electronic as well as print
22
(http://www.indianmirror.com/indian-industries/cosmetics.html)
61
Industry has mainly been driven by improved purchasing power and rising
fashion consciousness of the Indian population and industry players spending
readily on the promotional activities to increase consumer awareness and
develop their products.
According to a new research report, the Indian Cosmetics Industry is
expected to witness impressive growth rate in the near future owing to rising
beauty concern of both men and women. Today the industry holds promising
growth prospects for both existing and new players.The baseline is that there
has been a rise in variety of products offered by the industry players in the
country. The companies have started going for rural expansion and are
offering specialized products to generate revenues from all the corners of the
country. Improvement and strengthening of the Indian economy in the coming
years will also pave the way for the Indian cosmetics market over the forecast
period and develop the Cosmetic Industry.
The Indian Cosmetic market which traditionally a stronghold of a few major
Indian players like Lakme, and Ponds has seen a lot of foreign entrants to the
market within the last decade. India is a very price sensitive market and the
cosmetics and personal care product companies, especially the new entrants
have had to work out new innovative strategies to suit Indian preferences and
budgets to establish a hold on the market and establish a niche market for
them.
According to analysis and figures given by the Confederation of Indian
Industries (CII), the total Indian beauty and cosmetic market size currently
stands at US$950 million and showing growth between 15-20% per annum.
The overall beauty and wellness market that includes beauty services stands
at about US$2,680 million, according to CII estimates. The size of Indian
Cosmetics Industry globally is $ 274 billion, while that of the Indian cosmetic
industry is $ 4.6 billion. The current size of the Indian Cosmetic Industry is
approx US$ 600 million. Among these fastest growing segment is color
cosmetics, accounting for around US$ 60 million of the market. Industry
sources estimate a rapid growth rate of 20% per annum across different
63
industry show that with increased awakening which is growing even in rural
India, its size will grow in next 2-3 years to around US$ 1400 million from
current level of US$ 950 million. Till then Indias per capita consumption of
cosmetic and toiletries products could be on par with that of China which
currently is US$ 1.5, says ASSOCHAM analysis.
The Indian hair care market is mainly dominated by the hair oil segment,
which constitutes over half of the overall market. Perfumed oil (cooling oils,
light oils, and heavy amla oils) and coconut oil comprises the main segments
of hair oil market, while others account for minimal share in the market. The
consumption pattern of hair oil differs across different regions of the country.
Coconut oil is very popular in southern regions, while people in the north
prefer others, such as sesame, rapeseed, etc.
Although the market is conventionally dominated by the womens segment,
men are fast emerging as a separate consumer category. In the current
scenario, the market is witnessing a tremendous change in buying pattern of
the mens segment, as growing young generation are looking for care and
styling products catering to their specific needs. Consequently, industry
players are also introducing various products to meet the growing male
buyers demand.
Hair oils: The hair oil market is valued at ` 6 billions. Hair oiling is a major
niche in the hair care segment. Unlike market abroad, India has a large
number of consumers whose hair care expenditure also includes hair oils. The
penetration level of hair oil is around 87%. Around 50% of the population uses
hair oil everyday. The growth rate of hair oils in rural India is faster than the
growth rate in urban India.
Hair gels: Hair gel market segment is at a primary stage and not many local
brands are available in India. Hair gels/creams are mainly used for hair
grooming by men and is used as a fashion accessory. The market penetration
of hair gels/creams is very low, and is limited to a small section of the urban
66
market.
The Indian Soap Industry includes about 700 companies with combined
annual revenue of about $17 billion. Major companies in this industry include
divisions of P&G, Unilever, and Dial. The Indian Soap Industry is highly
concentrated with the top 50 companies holding almost 90% of the market.
The market size of global soap and detergent market size was estimated to
be around 31M tonne in 2004, which is estimated to grow to 33M tonne in the
coming years. Toilet soaps account for more than 10% of the total market of
soap and detergents. In Asia, the countries like China and India are showing
rapid growth in the toilet soap section. Market share of body wash was
estimated to be around 2% in 2004 and is showing signs of healthy growth in
these markets. Indias soap market is Rs 41.75 billion.
Indian Soap Industry volume is Rs 4,800-crore. For the purpose of gaining a
competitive edge, Indian companies are now relaunching their brands with
value-additions to woo consumers across India. For instance, Hindustan
Lever Ltd (HUL) has recently launched a host of toilet soap brands which
include Lifebuoy, Lux, Breeze and Lirilwith value additions. Also is in the
process of rolling out Ayush ayurvedic soap. The aim is to meet the evolving
needs of customers.
One of the factors which affect the demand of soaps is the penetration, which
the products have in market. In case of soaps this has not been a major issue
as the penetration in the rural area is as high as 97% and that for urban area
is around 99%. Thus approximately the penetration is around 99% for overall
India.
In terms of market share for Indian Soap Industry the data indicates that HUL
had a market share of 64 % in the soap market, followed by Nirma at 16.8 %
and Godrej at 4.4%. Nirmas market share was in the northern region was 21
%. The largest contributor to the toilet soaps market in Indian market is
Hindustan Lever with the total contribution to the economy & enjoys almost a
two-thirds share, with the second ranked Nirma Soaps placed at a distantly
67
low share of 16.8%. Lux and Lifebuoy have held the sway of the market for
almost fifty years.
Saop Top Leading CompaniesSaop
In the Rs 4,800-crore Indian toilet soaps market, the lead players include:
* HUL
* Godrej Consumer Products Ltd
* Colgate Palmolive Ltd and
* Wipro Consumer Care
Personal Wash (Soaps): The personal wash can be segregated into * Premium- Lux, Dove
* Economy- Nirma Bath, Lifebuoy
* Popular- Nirma, Cinthol
The price of the premium segment products is twice that of economy segment
products. The economy and popular segments are 4/5ths of the entire soaps
market. The penetration level of toilet soaps is 88.6%.
The toilet soaps market is estimated at 530,000 TPA including small imports
where the Hindustan Lever is the market leader. The market has several,
leading national and global brands and a large number of small brands. The
popular brands include Lifebuoy, Lux, Cinthol, Liril, Rexona, and Nirma.
Premium soaps are estimated to have a market volume of about 80,000
tonnes. This translates into a share of about 14 to 15%. However, by value it
is as much as 30%. The Indian Soap Industry includes about 700 companies
with combined annual revenue of about $17 billion. 70% of India's population
resides in the rural areas and around 50% of the soaps are sold in the rural
markets.
68
The market is littered over with several, leading national and global brands
and a large number of small brands, which have limited markets. The popular
and premium brands include Lifebuoy, Lux, Cinthol, Liril, Rexona, and Nirma.
Toilet soaps, despite their divergent brands, are not well differentiated by the
consumers. It is, therefore, not clear if it is the brand loyalty or
experimentation lured by high volume media campaign, which sustain them. A
consequence is that the market is fragmented. It is obvious that this must lead
to a highly competitive market. Toilet soap, once only an urban phenomenon,
has now penetrated practically all areas including remote rural areas. The
incremental demand flows from population increase and rise in usage norm
impacted as it is by a greater concern for hygiene. Increased sales revenues
would also expand from up gradation of quality or per unit value.
As the market is constituted now, it can be divided into four price segments:
premium, popular, discount and economy soaps. Premium soaps are
estimated to have a market volume of about 80,000 tonnes. This translates
into a share of about 14 to 15%. However, by value it is as much as 30%.
Indian Shampoo Market:
AT A time when most FMCG (fast moving consumer goods) categories are
inching along, personal products are being seen as the harbinger of
prosperity. And hair care products is the fastest-growing category within
personal products. Between 1994 and 1998, the market size of products such
as skincare and toothbrushes doubled in value. But the size of the shampoo
market expanded two-and-a-half times over the same period. Not surprisingly,
shampoos is a high priority area for major players such as Hindustan Lever.
The current size of the shampoo market, according to ORG-MARG, is Rs 850
crore -- equivalent to 30,000 tonnes in volume terms.
Unlike other FMCG categories such as soaps and detergents, which boast of
a penetration level of more than 90 per cent, shampoos remain a low
penetration category. Industry sources estimate that the urban market
penetration of shampoos is a modest 36 per cent. Shampoo usage in the rural
69
markets is even more infrequent, with a penetration level of 12 per cent. Thus,
even for the largest player in this industry, there is considerable scope for
volume expansion by converting non-users.
The major players in hair shampoo category are HUL, Marico, and Dabur
India.
The shampoo market is valued at Rs 4.5 billions and has the penetration level
of only 13% in India. The market is expected to expand due to increased
marketing by players, lower duties, and availability of shampoos in affordable
sachets. Sachet makes up to 40% of the total shampoo sale. The Indian
shampoo market is divided in two parts:* Cosmetic
* Anti-dandruff
The major players are HUL, and Procter & Gamble.
For a market with high potential, the shampoo market in India is dominated by
just a few players. From scores of brands five years ago, the shampoo market
has now been whittled down to a handful. Hindustan Lever (HUL), with a 65
per cent volume share (68 per cent share by value), dominates the market
with brands such as Sunsilk, Clinic Plus and Clinic All Clear. Cavin Kare
Limited, an unlisted company from Chennai, with brands such as Chik and
Nyle follows with a 19.8 per cent volume share23.
Procter & Gamble (P&G) is the only other large player in this category with
brands such as Pantene Pro-V and Head & Shoulders. P&G discontinued its
shampoo manufacturing operations in India in 2000. Most of its brands are
today directly imported from other Asian countries such as Thailand, Taiwan
and Vietnam. New entrants are probably discouraged by the formidable task
of establishing a distribution network from scratch. HUL's long established ties
with retailers and its extensive distribution reach probably acts as an entry
barrier for new entrants.
23
(http://www.hindu.com/businessline/iw/2001/01/21/stories/0521e051.htm)
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Cavin Kare Limited, which has managed to garner a significant share of the
shampoo market despite this handicap, has focussed on scaled-down
versions of its brands and herbal shampoos -- two segments where the
market leader did not have a presence. Cavin Kare's shampoo business has
grown faster than the overall market, at 20 per cent in 1998, 4 per cent in
1999 and 34 per cent over the past four quarters.
Despite its undisputed potential, the rapid expansion of the shampoo market
was interrupted in 1999. Overall growth rates in the market slowed to 1.7 per
cent in 1999, from 16 per cent the previous year. Between January and
November 2000, however, the market appears to have recovered some, and
the shampoo category has grown by around 10 per cent.
The company has identified three major barriers to shampoo use in India -the perception that shampoos contain harsh chemicals that could damage
hair, high price and the view that the shampoo is more of a glamour product
rather than a hygiene
His counterpart in Cavin Kare attributes the slowdown in growth rates to the
contraction of agricultural incomes. Roughly a fourth of the shampoo market is
in rural India. But the rural market is the key driver for sachets, which make up
70 per cent of the total shampoo sales. HUL has higher stakes in the rural
market with an 80 per cent share.
Therefore, the strategies of the major players have revolved around attacking
these barriers to usage. The players obviously believe that the key obstacle to
recruiting new users lies in the high price of shampoos as a product. Unlike
other FMCG categories, where marketers are experimenting with low unit
packs, as a concept, the low unit shampoo packs have been around for over a
decade. Therefore, marketers have been working at scaling down prices
further.
Cavin Kare made the first such attempt last year. It introduced a smaller 50
paise sachet of Chik, when most other sachets retailed at Rs 2. The effort
appears to have been an unqualified success, with the Chik brand expanding
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Lively Clean also offer functional benefits to users. Since these add-ons
enable brands to command a price premium over the plain shampoos, this
strategy could aid both volume and margin expansion.
One of the key barriers to shampoo usage lies in the reluctance to use a
synthetic product on hair. Worldwide, therefore, herbal shampoos or
botanicals, are a fast growing category. Ayur from RDM Traders Private
Limited and Nyle Herbal, a herbal shampoo launched by Cavin Kare, have
been some of the early entrants in the Indian herbal shampoos market.
These products claim to use traditional Indian herbs such as shikakai, soap
nuts and amla as ingredients and have been a success. Nyle Herbal is among
the top five shampoo brands in the country and herbal shampoos today
account for 10 per cent of the market size.
That industry leader, Hindustan Lever, does not as yet have a presence in this
segment is noteworthy. However, brands such as Sunsilk have been
emphasising natural ingredients such as `fruitamins'.
However, high price could be a key barrier when it comes to herbal
shampoos. The key challenge in manufacturing herbals lies in efficacy. Users
typically require larger quantities or higher concentrations of herbal shampoos
to replicate the results of synthetic shampoos. Bringing down prices can
therefore be quite difficult in this case. This is probably why 90 per cent of the
herbal shampoos still sells only in the urban markets.
Meanwhile, the value-added shampoo segment is getting quite crowded, with
a range of pharmaceutical and cosmetics companies launching specialised
products. While Dabur has leveraged Vatika's brand equity to launch Vatika
Herbal shampoo, Godrej Soaps has leveraged its dominance of the hair
colour market to launch Godrej Colourgloss shampoo, for users with coloured
hair. This apart, several pharma companies (including Johnson & Johnson)
have launched medicated anti-dandruff shampoos (which will probably carry
higher credibility with buyers), while cosmetic companies such as Biotique
and Lotus Herbals also have herbal shampoos on the shelves.
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The contribution of rural markets, which are growing faster than urban
markets, to Hindustan Unilever's (HUL) turnover is expected to rise from
about 40% now to 50% in the next four to five years.HUL is the leading fastmoving consumer goods (FMCG) company in India with deep rural
penetration of its home and personal care brands. HUL's turnover is roughly
Rs 18,000 crore. The company has put in place a direct distribution model to
enhance its presence in the hinterland. Over the last decade, the maker of
Lux soap, Wheel detergent and Sunsilk shampoo has launched special
initiatives to push its rural sales through project shakti and shaktimans.
However, HUL is not the only company which is keen on growing its rural pie.
Powered with an incremental increase in earnings through schemes such as
NREGA (National Rural Employment Guarantee Act), rural consumers are
uptrading to aspirational products like face wash, deodorants, cream biscuits
and noodles.
Statistics reveal that while the number of rural consumers earning about a
dollar a day would come down from 400 million to 250 million by 2020, the
number of consumers earning over $5 a day would have catapulted from 50
million today to 150 million by then. This represents a huge opportunity for
marketers to increase their rural presence.
According to the Neilsens January-February data 2011, HULs market share
(volumes) in shampoo segment declined by 1.3 percentage points to 47.3 per
cent while P&G gained by 2.4 percentage points with a market share of 17.7
per cent.Dabur on the other hand gained 0.8 percentage points capturing 6.7
per cent market share in the estimated Rs 3,000 crore Indian shampoo
market.The companys brands Clinic Plus, Dove and Pantene competes
against the likes of P&Gs Head & Shoulder and Daburs Vatika, ITCs
Fiama Di Wills.The company had recently revised prices upwards of its Lux
and Liril soap brands by up to 10 per cent.In the last couple of years, the
company has revamped its entire portfolio in an effort to attract customers. It
has been heavily spending on advertising and promotional activities in the last
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one year. HUL spent around Rs 2,140.95 crore on advertising and other
promotional campaigns24.
It was much more than its net profit of Rs 1,736.83 crore for the same period.
In the toothpaste category, where HUL sells brands like Close-Up and
Pepsodent, its market share grew by 1.3 percentage points to garner a share
of 23.3 per cent during January-February 2011 in the estimated Rs 3,200
crore Indian toothpaste market. According to the Nielsen data, market leader
Colgate almolives market share declined by 1.2 percentage points to 52.4 per
cent
The Toothpaste Market In India
Currently the toothpaste market in India stands at ` 2,000-rores. Toothpaste
usage in India is very low as compared to other countries. The potential for
growth is immense in the urban toothpaste market. The usage of toothpaste in
the Indian cities is about 190gms whereas in developed countries like USA
and England the toothpaste usage is 375 gms per person annually.
The top toothpaste brands in India include Colgate Palmolive, Hindustan
Lever Limited and Dabur India. The level of penetration of toothpaste in India
is 50 per cent. However the major toothpaste players in India are trying their
best to increase penetration levels in the rural parts of the country which is still
by far untapped.
At Present Colgate holds a market share of 52% and HUL 23%. 14.5% of the
market share is shared by brands such as Pepsodent, Babool, Sensofoam,
Cibaca, Neem, Vicco etc .
Colgate-Palmolive
Synonymous with toothpaste in India Colgate-Palmolive (India) Limited has
been ruling the oral health care industry in India over years. Colgate produces
a wide range of oral health care products which includes toothpastes and
24
(**http://www.thehindubusinessline.com/industry-andeconomy/marketing/article1684908.ece)
75
76
While Pears has dominated as high profile specialty soap, HUL undertook, in
1992, a project to manufacture the product for the world market at Khamgaon
in Maharashtra. Commercial production commenced in 1993.
To provide a sound base to its toilet soaps operations, HUL has also
branched out into other toiletries like shampoos and related products like
glycerine, fatty acids.
Denim is HULs franchise for Mens toiletries.
The Core Competencies of HUL is its nation wide strong Distribution network.
Before we look at its distribution network, the best so far in this country, let us
reflect on the rural India scenario.
Around 700 million people, or 70% of India's population, live in 6,27,000
villages in rural areas. 90% of the rural population is concentrated in villages
with a population of less than 2000.
The statistics is daunting. Particularly for HUL, which markets Packaged Mass
Consumer Goods (PMCG) of everyday use, the size of the rural market
makes it essential to tap.
HUL has traditionally focused on the rural market. Several of our company's
major business categories, such as Fabric Wash, Personal Wash and
Beverages, already get over 50% of their sales from rural areas. HUL realises
that there is much more that needs to be done. To service rural markets, the
key issues that need to be addressed are the 3 important As viz. availability,
awareness and overcoming prevalent attitudes and habits.
Extending Availability
Data on rural consumer buying behaviour indicates that the rural retailer
influences 35% of purchase occasions. Therefore, sheer product availability
can determine brand choice, volumes and market share.
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Project Bharat, the first and largest rural home-to-home operation to have
ever been mounted by any company, sought to address many of these
issues. The operation was conducted in high-potential districts of the country.
The exercise was started by the Personal Products Division in 1998, and
covered 13 million households by the end of 1999. In the course of the
operation, company vans visited villages across the country and distributed
sample packs comprising a low-unit-price pack of soaps.
The distribution was supported by explanation of product usage and a video
show, which was interspersed with product communication. Thus we
generated awareness of its product categories and the availability of
affordable packs.
Consumers were also made aware of the superior benefits of using our
products vis--vis their current habits (example: stress on hygiene), and the
affordability of the pack sizes on offer. The project, thus, successfully
addressed issues of awareness, attitudes and habits. Hopefully, as
consumers in rural areas get exposed to such value-added, value-for-money
alternatives, they will continue to buy into the categories. The project saw a
100% increase in penetration, user-ship and top-of-mind awareness in the
districts targeted. However, sampling once is not adequate to convert nonusers. So Personal Products rolled out a follow-up program, the Integrated
Rural Promotion Van (IRPV), to once more target villages with a population of
over 2,000.
Nirma
Nirmas success is based on the premise of consistent and effective delivery
of value for money equation to our customers. These benefits along with
betterment in the areas of distribution, packaging, advertising will ensure
steady growth for Nirma in future. Nirma's low-cost strategy is putting rivals
through the wringer. Nirma's strategy appears to have become a fashionable
mantra, even among large Indian groups.
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to
produce
detergents.
Nirma
pioneered
lower-cost
make 420,000 tonnes of soda ash each year. Iodized salt, another
commercial commodity, is a by-product.
Godrej Soaps
Godrej is currently the number three player, volume wise in the Industry.
Cinthol its flagship brand has recorded since the past few years decline in its
sales. This has led to the re-launch of Cinthol targeted for the entire family
unit. Currently even when the market is declining Godrej is recording a high
sale in terms of value of 24% by competing vigorously in the marketplace. A
correction in the prices of inputs resulted in better margins in the soaps
business as compared to the previous year. Godrej has come out with a
number of innovative consumer and trade offers.
The highlight was the launch of Fairglow which is the first innovative
breakthrough soap offering in the Indian market for many years. The product
meets a stated need of the consumer at no extra cost or effort and has met
with universal acceptance by the trade and consumers. Sandal and Natural
variants of No.1 soap launched keeping with the rising popularity of natural
variants in the soap industry. Renewed focus on Institutional sales and sales
to Canteen Stores Department led to growth in sales value in this segment.
Godrej has the distinction of being the first company in the world to develop
technology to make soap with vegetable oils, way back in 1930. It is also
manufacturing for other players in the Industry. Contract manufacturing of
toilet soaps registered a 20% volume growth but grew by only 7% in value
terms to Rs618mn.
Capacity utilization in the industry varies from as low as 50% to 80%.
Godrej Soaps has been using its capacity by working for other producers. It
still makes Camay and has arrangement to produce it for two more years.
GSL makes Rexona and Dettol for Reckitt & Colman of India and Johnson's
Baby Soap for Hindustan Lever (Johnson & Johnson). And yet only half of its
capacity of 71,000 tonnes is being used.
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25
Sharif Menon (2011), International Brands & the Indian Consumer: A study of Critical
Success Factors with Special Focus on Selected FMCG Brands, Vil 41, No. 9, Indian Journal
of marketing
83
for increasing its sales in the rural areas. The SHGs are offered chance to
become companys local small scale distributor in the rural areas. The groups,
typically of 15 to 20 people, buy a small stock of items such as soap,
detergent or shampoo and then sell directly to consumers in their homes.
Lower prices/smaller packaging has been the most common strategies
adopted by FMCG companies to penetrate rural markets. HLL initiated
Operation Bharat to tap rural market by rolling out low priced sample packets
of its toothpaste, fairness cream, shampoo, cream and other products.
Similarly LPG companies have introduced small sized cylinders ensuring that
price remains in the affordable range for its rural consumers. When
developing products in any category, marketers must identify the typical rural
specific needs. Urban products cannot be dumped into rural markets without
modifications. The rural audience better receives tailor-made products as the
consumers feel empowered and tend to identify with the offering. For
instance, shampoos or soaps with distinctive, strong rose or jasmine
perfumes are very with the rural women in South India. The urban women do
not identify as strongly with these perfumes.
Every marketer must realize that the rural consumer is not a miser. He is not
simply looking for the cheapest product in every category. He understands
and demands value for money in every purchase that he makes. Pricing
therefore is a direct function of factors including cost-benefit advantage and
opportunity cost. Pricing offered to consumers should be for value offerings
that are affordable. Price sensitivity is extremely high and comparison with
competitive prices is common.
It must be remembered that the rural consumer does not have a budget
problem. He has a cash flow problem. This is because the village folk receive
funds only twice a year. At these times, he is capable of making high volume
purchases. At all times, however, the unit price is critical and so is the pack
size. Because of this, in the lean season when there is a cash flow crunch,
marketers need to provide financial products, schemes or solutions that suit
the needs of the rural population
85
integration of rural and urban markets is underway. Once this happens the
gulf that divides the two markets will become bridges. For this, change needs
to be engaged and managed. The overall marketing mix framework for rural
markets must therefore focus around plugging the segments with the right
product, using value for money pricing, selecting the most appropriate
channel of distribution, building long term relationships with the customers
and finally, using the power of emotional brands.
The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4
billion in 2015. Penetration level as well as per capita consumption in most
product categories like jams, toothpaste, hair oil, skin care, hair wash etc in
India is low indicating the untapped market potential.
Burgeoning Indian
population, particularly the middle class and the rural segments, presents an
opportunity to makers of branded products to convert consumers to branded
products. Growth is also likely to come from consumer 'upgrading' in the
matured product categories. With 200 million people expected to shift to
processed and packaged food by 2010, India needs around US$ 28 billion of
investment in the food-processing industry (Bansal, 2009)
Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate
Palmolive, Parle foods and Malhotra Marketing have carved inroads into the
heart of rural markets. Various categories of products have been able to
spread their tentacles deep into the rural market and achieved significant
recognition in the country households. And, in the process, the regional
brands, local brands and the other unbranded offerings got displaced by the
leading brands.
Company
Household penetration
HUL
88%
56%
Colgate Palmolive
33%
Parle Foods
31%
87
Malhotra marketing
27%
Category
Washing cakes/bars
88%
Tea
56%
Salt
33%
Category
Category
Penetration penetration
Toilet Soap
91%
Lifebuoy
Washing cakes/Bars
88%
Wheel
Edible oil
84%
Tea
77%
Lipton Taaza
70%
Nirma
Salt
64%
Tata Salt
Biscuits
61%
Parle G
There are other attributes in the promotion strategy which are explained as
under:
Mass media: In the present world mass media is a powerful medium of
1.
Television.
Cinema
Radio
that the potential users are identified and awareness is created among them
about the product, its features, uses and benefits. This can be achieved only
by personal selling by highly motivated sales person. In fact the word of
mouth information holds lot validity in rural areas even today. This is the
reason why opinion leaders and word of mouth are thriving among rural
consumers. An opinion leader in rural areas can be defined as a person who
is considered to be knowledgeable and is consulted by others and his advice
is normally followed. The opinion leaders may be big landlords or politicians or
progressive farmers.
3.
shops and schools are ideal places for painting and the company need not
have to pay any rent for the same. The walls have to be painted at least one
or two feet from ground level. It is better to take permission of the owner. Very
often the owner takes responsibility for taking care of the wall painting.
Painting to be avoided during election time and rainy season. The matter
should be in the form of pictures, slogans for catching the attention of people.
Companies marketing TV, fans, branded coffee/tea, toothpaste, pesticides,
fertilizers etc. use wall painting as promotion medium in rural areas.
Tree boards:
These are painted boards of about two square feet in dimension having the
picture or name or slogan of the product painted on it. The cost of such a
painted board is about Rs.80. These boards are fixed to the trees on both
sides of the village road at a height of about 10 feet from ground level. These
boards attract the attention of slow moving vehicles like cycles, bullock carts
and tractors and people walking on the road. Considering the poor condition
of roads, even the buses move at slow speed through village road. Fertilizer
and pesticide companies in rural areas extensively use tree boards. These
are low priced promotion items and can be used by consumer goods
companies too.
Informal/Rural specific media
These media with effective reach and personalized communication will help in
realizing the promotional objectives. Companies to suit the specific
requirements of rural communication are using a variety of such media
effectively and some of the more important media and methods are given
below.
Farm-to-Farm/House-to-House visit:
Rural people prefer face-to-face communication and farm visits facilitate twoway communication. The advantage is that the sales person can understand
the needs and wants of the rural customer by directly discussing with him and
92
house a few months prior to the launch if the branch to demonstrate that the
paint does not peel off.
The Melas:
Melas are of different types i.e. commodity fairs, cattle fairs and religious fairs
and may be held only for a day or may extend over a week. Many companies
have come out with creative ideas for participating in such melas. Examples:
a) Britannia promotes Tiger Brand Biscuits through melas. b) The
mahakumbh at Allahabad is the biggest mela in India. HLL has put up 14
stalls in the mela grounds for promoting Lifebuoy. Handcarts have been
deployed for increasing access.
The Haats:
Traditionally on certain days of week, both the sellers and buyers meet in the
village to buy and sell goods and services. These are the haats that are being
held regularly in all rural areas. The sellers arrive in the morning in the haat
and remain till late in the evening. Next day they move to another haat. The
reason being that in villages the wages are paid on weekly basis and haat is
conducted on the day when the villages get their wages. For the marketer, the
haat can be an ideal platform for advertising and selling of goods. By
participating in haats and melas, the company can not only promote and sell
the products but also understand the shared values, beliefs and perceptions
of rural customers that influence his buying behaviour.
Folk dances:
These are well-appreciated form of entertainment available to the village
people. The folk dance Kuravan Kurathi is popular in Tamil Nadu. The
troupe consists of dancers, drummers and musicians and they move in a welldecorated van from one village to another village singing and dancing. In a
day the troupe covers about 8-10 villages. As soon as the van reaches a
village, film songs are played to attract the attention of the villages. This is
followed by folk dances. Mike announcement is made about the companys
products and leaflets are distributed. After the dance programme, queries, if
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any, about the products are answered by the sales person. Folk dance
programme costs about Rs.5000 per day and therefore these programmes
are conducted during the peak season in selected villages. Examples:
Fertilizer and pesticide companies organize folk dance programmes during
peak season in selected markets. Thumps Up has sponsored Lavnis, the folk
dance programme of Maharashtra and over 30 programmes have been
arranged in selected rural markets.
Audio Visual Publicity Vans (AVP Vans):
AV unit is one of the effective tools for rural communication. The van is a
mobile promotion station having facilities for screening films slides and mike
publicity. The sales person makes a brief talk about situation in the village, the
products and the benefits. The ad film is screened along with some popular
film shots and this continues for about 30 minutes. At the end of the film show,
he distributes handbills and answers queries of the customers. The whole
operation takes about 1-2 hours depending upon the products under
promotion, number of participants in the meeting and time taken for question
and answers. The vans move to the next village for the second show. The
cost of running a fully equipped AVP unit is about Rs.4000 per day and AVP
van operation has to be considered as an investment for business
development in rural areas. Example: Companies such as HLL, Colgate, and
Phillips have made effective use of AVP vans for popularizing their products in
rural areas.
Product display contests:
Package is an integral part of the product. Its main purpose is to protect the
product during transit, to preserve the quality and to avoid any loss in quality
and quantity. The main purpose of this contest is to remind the customer to
buy the product as soon as he enters the shop. Another objective is to
influence the dealer to stock the product and support the company in
increasing the sales. The display contest has to be announced well in
advance and promotional materials to be distributed to all the selected dealers
in a geographical area. Prizes for best displays are announced to motivate the
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dealers; the contest lasts for about a month. A well-planned product display
contest not only increases the involvement of dealers in the companys
products but also increases the sales during the contest period. This is used
for promoting consumer goods such as shampoos, soaps and toothpaste.
Field demonstration:
This is based on the extension principle seeing is believing and is one of the
most effective methods to show the superiority of the companys products to
the customers. A progressive farmer who is an opinion leader is selected and
the demonstration is conducted in his field in the presence of a group of
farmers in the village. The farmers observe the results in the field and the
local dealer calls on them in their farms and persuades them to buy the
particular brand of pesticide or fertilizer. Examples: a) Spraying a particular
brand of an insecticide against insect pests and showing the farmer how
effectively the insects are controlled. b) Demonstrating the use of
tractor/implements for different agricultural operations. c) Hawkins pressure
cooker has demonstration representatives who carry out demos in rural
households. The representative receives 1% commission for every customer
who approaches the dealer via demonstrations. e) Similarly effectiveness of
detergents, pressure cookers, vaccum cleaners and mosquito coils could be
promoted by demonstrations in selected markets.
Field days:
These are extension of field demonstrations. One of the main objectives of
following modern agricultural practices is to increase the yield. The company
organizes demonstrations in a piece of land belonging to progressive farmers.
All the fertilizers, pesticides, nutrients etc. are applied after making field
observations. Just before harvest, all the important farmers are invited to see
demonstration plot and see for themselves how the yields are better in the
plot compared to other fields. Field demonstrations/field days consume lot of
time and efforts and therefore have to be planned well.
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Information centers:
They provide latest information on cultivation of crops, fertilizer application,
weed, management and control of pests and diseases. Experienced
agricultural graduates who make frequent visits to the field and advice farmers
on modern agricultural practices manage the centers. They also provide
information on farm implements, seeds, fertilizers, pesticides, diesel engines,
sprayers and tractors etc. Many consumer goods companies have opened
show rooms in prosperous rural areas. Example: Hero Honda has opened
extension counters with show room facilities in major rural markets.
Life-style marketing:
Each rural market segment has certain special features i.e. they share
common life-style traits. They include village sports, religious events,
prominent personalities and role models. Examples: Textile mills maintaining
community gardens, Mineral water companies supplying clean drinking water
during summer festivals in villages and Consumer goods companies
sponsoring Kabaddi.
Mandi and Mela magic
At last count, India witnessed over 50,000 melas. Of these 25,000 meals are
held to signify religious, cultural festivals as well as local fairs and events. On
an average, visitors at these melas spend between Rs. 5,000 to Rs. 50,000 a
day. For example, 3 lakh people visited the annual mela at Navchadi which
lasts for 7 days in Meerut. The largest such mela is the Maha Kumbh Mela
which is visited by an average of 12 crore people.
There is however, a caveat when an organization is considering using mela
for marketing their products. Is the audience at this mela fit for promotion of
the product at hand? What are the psychographics of this audience? What is
the motivational and behavioural impetus that brings visitors to each of these
melas. On considering these questions, it has been observed that melas are
fit to generate product exposure, package familiarity, brand reminder and
word of mouth. However, for products that need concept marketing and those
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that have high prices, such melas are not suitable promotion media. This is
because the time and the mood of the people that visit these melas are not
right to digest technical information or for making large purchases. People
come to melas to have a good time and are not reminded of such high
technology or high priced products when they return home. In the words of
Mr. Neville Gomes, Managing Director of Multimedia Aquarius, promotion at
melas is like a one night stand. There will be no reminder later. Thus, a large
amount of qualitative judgment is indeed in planning promotions at melas by
media planners.
Haats
Haats are the nerve centre of Rural India. They are a readymade distribution
network embedded in the fabric of rural society for over 1000 years. They
have been held on a regular basis across the length and breadth of the
country for over 1000 years. Right from the time of Chandragupta Maurya,
Haats are seen as a place for social, cultural and economic interchange.
One in every five villages with a population of over 2000 has a haat. In
villages with less than 2000 people this figure reduces to 1 in 20 villages.
Typically, an average haat will have close to 300 stalls. A haat usually serves
around 5000 visitors. Considering that the average population of an Indian
village is approximately 1000, each haat serves 5 villages. A study estimates
that 47,000 haats are conducted in rural India. These rural super markets are
much larger than all the world's K-marts and Wal-marts put together.
A lot of re-distribution also occurs through haats. This is because, a large
number of retailers and sub-wholesalers buy from haats for their village
stores. What is most attractive to marketers is that 90% + of sales in haats are
on cash basis. Traditionally, in village shops a lot of credit sales occur due to
the fact that in a small geographic area of a village, everybody knows
everybody. Considering that over 5000 visit a haat from 5 villages, the system
gets derelationalised. Apart from the 90% cash sale, 5 to 7% is conducted on
barter system and the rest 3 to 5% is on credit. Also attractive to companies
wishing to use the system is the low selling overheads. Participation fees at
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haats are a flat Re.1 to Rs.5 per stall and this rate is common to a giant like
Hindustan Lever and the smallest local seller.
Distribution costs must be reduced through optimum utilization of the network.
Thus, incorporating haats in the distribution strategy of a rural marketing
organization selling consumer goods and FMCG products (typically once a
week purchase items) is a tremendous opportunity.
Perhaps the other most important factor to consider while developing rural
distribution strategy is that the move from transactional marketing to
relationship marketing is most evident in the village market. A strong bond
needs to be created with every consumer even in the remotest village and the
smallest town. Marketing in Rural India is undoubtedly a long-haul exercise
and one that involves great expense. Only those with a strong mind, a tough
heart and stiff hands survive.
There is also a need to realise that the dealer is the company's "unpaid" sales
force. It is essential to educate and involve him as he is the local company
representative and is the only member in the channel of distribution that is in
direct contact with the final consumer. The dealers' feedback needs to be
obtained as the direction for future strategy emanates here.
The power of Rural Communication
With the growth and development in the field of agriculture, large number of
Industrial products is being used as inputs for productivity improvement and
maintenance. Similarly, a large number of industrial and urban manufactured
products are being used for various consumption purposes in rural areas.
There is a definite trend in favor of the industry playing a predominant role in
rural agricultural production and consumption processes. This new and
increasing role has prompted a new way of understanding the processes
known as rural marketing.
The mass media has created increased demand for goods and services in
rural area. Smart marketers are employing the right mix of conventional and
no-conventional media to create increased demand for products. The role of
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nd
Rural markets are growing faster and form the target group for
various consumer goods.
Increase in rural income and savings has led to green house cultivation
of flowers and vegetables, mushroom cultivation, development of
industries such as cotton ginning and spinning mills, paddy processing
units etc.
The rural markets are highly scattered over a wide geographical area
and therefore that marketers have huge potential markets for
promoting products and services.
27
ST
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edition, pg21-22
The village retailer is the link between the rural consumer and
manufacturer. He plays a major role in introducing new products in
rural markets.
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Ramkishen (2009): New Perspectives in Rural & Agricultural Marketing, Jaco Publishing
nd
House, 2 Ed
102
th
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105
Rural marketing requires the understanding of the complexities and this article
reviews some of the key issues. Indian agricultural industry has been growing
at a tremendous pace in the last few decades. The rural areas are consuming
a large number of industrial and urban manufactured products.
The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for
understanding a new process called Rural Marketing. The concept of rural
marketing has to be distinguished from Agricultural marketing. Marketing is
the process of identifying and satisfying customers needs and providing them
with adequate after sales service. Rural marketing is different from agricultural
marketing, which signifies marketing of rural products to the urban consumer
or institutional markets.
Rural marketing basically deals with delivering manufactured or processed
inputs or services to rural producers, the demand for which is basically a
derived outcome. Rural marketing scientists also term it as developmental
marketing, as the process of rural marketing involves an urban to rural
activity, which in turn is characterised by various peculiarities in terms of
nature of market, products and processes. Rural marketing differs from
agricultural or consumer products marketing in terms of the nature of
transactions, which includes participants, products, modalities, norms and
outcomes. The participants in case of Rural Marketing would also be different
they include input manufacturers, dealers, farmers, opinion makers,
government agencies and traders. The existing approach to the rural markets
has viewed the markets as a homogeneous one, but in practice, there are
significant buyers and user differences across regions as well as within that
require a differential treatment of the marketing problems. These differences
could be in terms of the type of farmers, type of crops and other agro-climatic
conditions.
One has to understand the market norms in agricultural input so as to devise
good marketing strategies and to avoid unethical practices, which distort the
marketing environment. Many of the inputs used for production process have
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products.
MNCs have realized that in India celebrities enjoyed a great popularity so they
now associate themselves with Indian celebrities. Recently Luxor Writing
Instruments Ltd. a JV of Gillette and Luxor has launched 500 Gajgamini
range of Parker Sonnet Hussain special edition fountain pens, priced at Rs.
5000. This pen is signed by Mr. Makbul Fida Hussain a renowned painter who
has created Gajgamini range of paintings. Companies are promoting players
like Bhaichung Bhutia, who is promoted by Reebok, so that they can
associate their name with players like him and get popularity. Melas are
places where villagers gather once in a while for shopping. Companies take
advantage of such events to market their products. Dabur uses these events
to sell products like JANAM GHUTI(Gripe water). NCAER estimates that
around half of items sold in these melas are FMCG products and consumer
durables. Escorts also displays its products like tractors and motorcycles in
such melas.
A picture is worth thousand words. The message is simple and clean. Rural
people like the sight of bright colours. COKE, PEPSI and TATA traders
advertise their products through paintings.
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